With the consolidation of federal student loans instead of making individual payments for each federal loan, they are combined and you instead make one loan payment. Usually loan consolidation is done when the borrower has difficulty making the minimum payments for each individual federal loan. Instead federal loan consolidation gives a payment option of making lower minimum payments over a longer period of time. The borrower is therefore less pressured to as the monthly payments are lower and more time is given to repay the loans.
One advantage of federal loan consolidation versus
the private loans borrowers with bad credit is the fact that the loans offered can be unsecured loans. Private student loans offered to borrowers with bad credit who want consolidation are usually secured loan so as to lower the risk for non-payment of the loan.
Loan consolidation involves making lower payments over a longer period of time. This attracts a higher interest rate over the lifetime of the loan.
Consolidation can help to improve your credit score as your credit report will now have fewer open accounts.
Before taking on a federal loan consolidation,be sure to consider all options which help to reduce loan costs.Options such as participating in programs that will result in a partial or full waiver on the required amount to be paid on the loan. These usually include the borrower being involved in activities such as volunteering, ,military service or teaching in certain areas to qualify for the waiver.
The next posts will give more details on federal loan consolidation
